KEY POINTS:
Kiwibank's 31 per cent leap in net profit added some welcome sizzle to New Zealand Post's half-year bottom line, which would have wilted otherwise.
NZ Post's net profit for the six months to December at $52.9 million was 9 per cent up on last year's corresponding result, with Kiwibank contributing 31 per cent at $22.7 million.
Excluding the fast growing banking division, the group's bottom line would have been down 3 per cent.
NZ Post chief executive John Allen acknowledged Kiwibank's contribution was "strong and positive", but said the group's international mail, Datamail and courier businesses had also done well.
However the group's core postal service continues to face pressures, not just from the impact of "electronic substitution" or email as it is more commonly known, on letter volumes, but also from declining margins resulting from higher fuel prices and labour costs, and the service's ever expanding footprint.
Domestic letter volumes were falling by somewhere between 3 and 5 per cent yearly and that decline was accelerating, said Allen.
At the same time as volumes were falling, the average weight of items was rising and the number of delivery points was increasing due to new subdivisions and property developments.
However, thanks to recent increases in charges, and a five-year $85 million investment in new mail processing facilities, the domestic letters business remained profitable, unlike similar services overseas including Australia, Allen said.
A further rise in the standard domestic letter rate, which rose 5c to 50c last year, was unlikely for some time, he said.
But the headwinds for the letters business had been well anticipated, and NZ Post had moved to diversify.
"What we are seeing and have seen for the last few years is that strategy bearing fruit. We are seeing good performances across that diversified group."
Allen reiterated comments last week from Kiwibank boss Sam Knowles that the bank was well placed compared with its major bank rivals to weather the current credit market turmoil, although he acknowledged there was a "relatively uncertain economic environment".
"At a profit and loss level, I don't doubt there will be some challenges for some parts of the businesses."
On the other hand, that potentially created opportunities for the group, particularly those businesses that were counter-cyclical, including its courier divisions.
NZ Post will pay the Government an interim dividend of $16.9 million, down from $20.3 million a year ago, which included a $5 million one-off payment from the proceeds of its sale of half the DHL courier business to Deutsche Post.
